Bond sales knocks rand to 2009 low

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Cape Town - The rand dropped to the lowest since March 2009, fuelled by the longest South African bond selloff in more than 15 years, as continued signs of growth in the US drove speculation the Federal Reserve will curb bond buying.

US growth data today may help investors gauge the outlook for Fed stimulus before tomorrow’s payrolls report.

Foreign investors dumped South African bonds for an 11th straight day yesterday, the longest streak since June 1998, according to JSE Ltd. data compiled by Bloomberg.

The nation relies on capital inflows to fund its current-account gap, which swelled to a four-year high in the third quarter.

“We’re seeing evidence of the continued unwind of risky assets, and it’s all to do with growing concern about Fed tapering,” Michael Keenan, a South Africa strategist at Barclays Plc’s Absa unit, said by phone from Johannesburg.

“Because South Africa is so dependent on capital inflows, this will hurt the rand. It’s still got a long way to go. We could see more selling.”

The rand weakened 0.6 percent to 10.5028 per dollar by 10:46 a.m. in Johannesburg, bringing its decline in the past four days to 3.1 percent, the most out of 31 emerging-market and 24 major currencies tracked by Bloomberg.

Yields on benchmark bonds due December 2026 rose three basis points, or 0.03 percentage points, to 8.53 percent.

Foreign investors sold 36.3 billion rand ($3.5 billion) of South African stocks and bonds since the beginning of November, according to JSE data.

The nation needs average inflows of 19.5 billion rand a month to plug its current-account shortfall, according to Standard Bank Group Ltd.

The deficit widened to 6.8 percent in the third quarter from 5.9 percent the previous three months, the Reserve Bank said on November 3.

Companies Hiring

A US Labor Department report tomorrow may show employers in the world’s biggest economy added 185,000 jobs last month after boosting positions by 204,000 in October, according to the median estimate of 46 analysts surveyed by Bloomberg.

Companies increased hiring by 215,000 in November, according to figures yesterday from the ADP Research Institute.

A second report today may show the US economy grew an annualised 3.1 percent in the three months through September from the previous period, according to a Bloomberg survey.

That would be up from a 2.8 percent initial reading and a final figure of 2.5 percent for the second quarter. - Bloomberg News

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